Sprint Corporation option traders split on short-term trajectory

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest among options traders this afternoon is Sprint Corporation (NYSE:S). Meanwhile, dropping off the list since last time were BP plc (ADR) (NYSE:BP), Chesapeake Energy Corporation (NYSE:CHK), and Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR).

Overall option volume on Sprint Corporation has soared to more than two times the average intraday rate this afternoon, with the majority of the activity transpiring in three large blocks at three front-month strikes. Diving deeper, it appears one speculator is betting on extended gains for the telecom concern in the near term, while a different trader is eyeing a pullback for S over the next several weeks.

The two most active strikes thus far are Sprint's June 9 and 11 calls, where a collective 61,254 contracts are on the tape. The glut of this action happened earlier in the session when one block of 40,000 June 11 calls was bought for $0.07 apiece, at the same time a block of 20,000 June 9 calls was sold for $0.55 each.

The two theories posed by Trade-Alert are that this could represent either a trader closing out the June 9 calls to fund a larger purchase of the June 11 calls, or it could be at the hands of a speculator initiating a call ratio spread in the front-month series. In both scenarios, the goal is for S to rally above $11 by the close on Friday, June 20 -- when the options expire. Sprint has not seen the north side of this area since late December.

On the put side of the fence, the most active option is the June 9 strike, where 11,466 contracts have been exchanged. Nearly all of this activity crossed in one fell swoop, when a lot of 11,242 contracts went off right after the open. According to Trade-Alert, these puts were purchased closer to the ask price at $0.44 apiece, signaling buyer-driven activity. Meanwhile, implied volatility ticked higher at the transaction, and volume outstrips open interest, making it safe to assume that new positions are being initiated.

Based on the initial premium paid, this put buyer will profit if S is sitting south of breakeven at $8.56 (strike less net debit) at front-month expiration. Should the stock maintain its newfound perch atop $9 over the next four weeks, the most the trader stands to lose is the initial cash outlay, or $494,648 (11,242 contracts * $0.44 premium paid * 100 shares per contract).

On the charts, S has been a beast since taking a sharp bounce off its 200-day moving average in late April, with the shares up 24% from their April 28 intraday low of $7.38. This uptrend is continuing in today's session, after Bernstein initiated coverage of Sprint Corporation (NYSE:S) with a "market perform" rating. Additionally, S announced this morning that it has extended its long-term roaming agreement with NTELOS Holdings Corp. (NASDAQ:NTLS). At last check, shares of S were 0.7% higher at $9.16. (Of note, NTLS is soaring on the news, up more than 18% this afternoon).